Supply Chain Network

Design
(FMCG SECTOR)
 What is Supply Chain
Network Design?
• The success of any supply chain network will
depend on the manufacturing plants, suppliers,
warehouses, and how the product flows from
each of the origins to the final customer.

• For any successful supply chain, the number of

facilities and their locations are a critical factor.
In fact, 80 percent of the operational costs of the
supply chain networks depend on where the
facilities are located and the product flows
between them.

• A systematic approach to determining the best

location and optimal size of the facilities to be
included in the supply chain, and to ensure an
optimal flow of products
 Facility Types in
FMCG
Storage
Third Party
Manufactu Loc / Distributio Retail
Logistics
ring Plants Warehouse n Centers Outlets
Hubs
s
Why Network Design Is Needed in
FMCG
Need Explanation
🛒 Customer FMCG products must be readily available at all retail outlets. A well-
Responsiveness designed network ensures shorter lead times and frequent replenishment.

🚛 Efficient Optimizing the location and number of warehouses and distribution centers
Distribution minimizes transportation costs and ensures product freshness.
Helps reduce logistics, warehousing, and inventory holding costs by
💸 Cost Control
preventing overstocking or stockouts.
📦 Inventory Strategic location of facilities improves inventory turnover and reduces
Optimization working capital requirements.
📈 Scalability A flexible network can support expansion into new markets or geographies.
🌎 Market Proper network design enables better coverage of rural and urban markets,
Penetration a critical factor in emerging economies.
Geographic diversification of facilities mitigates risks due to regional
📋 Risk Management
disruptions (e.g., floods, strikes).
Best Location Characteristics
for FMCG Facilities
Location Factor Why It Matters
Near Major Ensures efficient transport to/from
Highways/Motorways/Ports warehouses and markets
Skilled and affordable workforce for
Access to Labor
manufacturing and packaging
Reduces lead time and cost for inbound
🌾 Proximity to Raw Material Sources
logistics
Cuts down on last-mile delivery time and
Near High-Demand Urban Areas
cost
📦 Availability of Industrial Utilities, warehousing space, and logistics
Infrastructure providers
Ideal for serving multiple zones from one
🌍 Centrally Located Within Country facility (like Faisalabad for Central/North
Pakistan)
Best Locations in Pakistan for
FMCG

Location Why It’s Ideal

Faisalabad (M3
Centrally located, industrial hub, near agriculture
Industrial Zone)
Lahore (Sundar
Access to North and Central markets
Industrial Estate)
Karachi (Port & SITE
Near port for imports/exports, large market
areas)
Strategic for South Punjab and logistics to Sindh and
Multan
Balochistan
Hub (Balochistan) Good for serving Balochistan and Karachi outskirts
SCM Network Design at Shangrila
Foods Pvt Ltd
SCM Network Design at Shangrila
Foods Pvt Ltd

Brands of Company
Ketchup &
Sauces
Bevera Fruit Drinks
Seasoning Grocery
ges
Nectars
Pickles
SCM Network Design at Shangrila
Foods Pvt Ltd

Facility Overview of Company

SBU/
Industry Manufacturi Warehouses
Product
Sector: ng Facility: :
Line:
• FMCG (Food • Grocery • Karachi • Karachi
& • Beverages • Faisalabad • Lahore
Beverages) (under • Faisalabad
developmen
t)
SCM Network Design at Shangrila
Foods Pvt Ltd

Facility Role

Role: Role:
Primary Primary
Beverage Grocery
Karachi Manufacturi Manufacturi
Faisalabad
Plant ng Hub ng Hub
Plant (New)
Export National
Fulfillment Distribution
Center Node for
Grocery Line

Beverage Manufacturi
production ng of
Processes: (e.g., fruit ketchup,
Processes:
drinks, sauces,
juices) pickles, and
seasonings
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Focus on
Grocery Line:
Shifting Product
ketchup, Segmentatio
Proximity to
sauces, and n:
Demand Separate
pickles Segregation
Center: Entity:
production of beverage
Punjab Individual
Strategic closer to and grocery
accounts for entity of
Factors core lines allows
the 70% of Grocery and
customers more
the total Beverages in
improves strategic
sales of future.
responsivene focus and
Shangrila.
ss and resource
lowers allocation.
delivery lead
times.
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Modern Food
Processing
Equipment: Utility Access:
Availability of space in Reliable electricity and
Technological
M3 Industrial Zone to water availability,
Factors
install advanced critical for food-grade
machinery for vacuum processing.
cooking, bottling, and
food safety systems.
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Government
Lower Operational Industrial Policy:
Costs in Punjab: Punjab's industrial
Labour, land, and zones offer tax
Macroeconomic
some raw materials benefits, subsidies, or
Factors
(like tomatoes) are incentives for
cheaper than in manufacturers,
Karachi. especially in agro-
based sectors.

https://www.punjab.gov.pk/node/6247
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Favorable Business
Climate:
Stable Local
Encouragement of
Governance: Punjab
investment and
Political Factors generally has fewer
industrial
political disruptions
development in
compared to Karachi.
special economic
zones like M3.
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Road Industrial
Connectivity: Estate
Proximity to
Well-connected Services:
Suppliers: Easy
road networks Ready-to-
access to raw
linking operate utilities,
Infrastructure material sources
Faisalabad to sewage
Factors like tomato
Lahore, treatment, fire
farms, spice
Islamabad, safety, and
suppliers, and
Multan, and telecommunicati
packaging units.
other high- on
demand areas. infrastructure.
Key Facts
•Distance from Lahore International Airport is 55 km
•Distance from Railway Station-Sheikhupura is 6 km
•Distance from Dry Port - Lahore is 42 km
•Distance from Govt. Technical Training Institute
Sheikhupura is 15 km
SCM Network Design at Shangrila
Foods Pvt Ltd

Factors Infl uencing Network Design Decisions

Reduced
Cost-Effective
Freight Cost: Inventory
Land
Transportation Efficiency:
Acquisition:
costs for Lower safety
Compared to
Punjab, KPK, stock levels
Karachi,
Logistics & and northern required due to
industrial land
Facility Costs markets are faster
in Faisalabad is
significantly replenishment
more affordable
lower when to central &
for large-scale
dispatched northern
manufacturing
from Faisalabad regions.
setups.
vs Karachi.
Video Link: https://www.youtube.com/watch?
v=_UC1PCMcbMg
Information Technology
in SCM
(FMCG SECTOR)
 Information Technology in SCM

Key Software Systems in FMCG Sector

ERP Systems: Integrated functions like inventory, finance,

procurement
MRP Software: Material planning and production scheduling
tools
Warehouse Management: Inventory tracking and logistics
management
Distribution Management System (DMS):Optimizes routes
and delivery schedules
Transportation Management System (TMS):TMS and ROS
are needed for both Primary and Secondary Distribution of
FMCG products
Business Intelligence Software (BI):FMCG businesses
generate an enormous amount of data everyday, but only a
few are of paramount importance.
Demand Planning Software:Demand planning is an
essential part of a supply chain management process, in which
firms accumulate statistics and use market signals to predict
customer demand tendency.
 Information Technology in SCM

ERP Systems in FMCG Industry

Microsoft Oracle
SAP S/4 Other
Dynamics Odoo NetSuite,
HANA Inhouse ERP
365 EBS, Fusion
 Information Technology in SCM
Major ERP Platforms Used by FMCG Firms in Pakistan

Company (FMCG) Primary ERP platform Key modules in live use Sources
Unilever Pakistan Ltd. SAP S/4HANA FI/CO, MM, PP, SD, EWM, APO (www.slideshare.n
et)
Nestlé Pakistan SAP ECC 6.0 MM, PP, SD, FI/CO, QM, BW (prezi.com)
Coca-Cola Icecek Pakistan SAP ERP MM, PP, SD, FI/CO, QM, BW (SSRN)
Engro Foods (FrieslandCampina
Oracle E-Business Suite R12 GL, PO, OM, CRM, WMS (prezi.com)
Engro)
Hilal Foods SAP S/4HANA MM, PP, SD, FI/CO, QM (Course Hero)
(LinkedIn,
Haleeb Foods Oracle E-Business Suite MFG, INV, AP/AR, HR
LinkedIn)
Youngs Foods SAP S/4HANA MM, PP, SD, FI/CO, QM, WM
National Foods SAP S/4HANA MM, PP, SD, FI/CO, QM, WM
Shan Foods SAP S/4HANA MM, PP, SD, FI/CO, QM, WM
MM, PP, SD, FI/CO, QM, WM, Ariba, TM,
Tapal Tea SAP S/4HANA
FSCM
 Information Technology in SCM
Nestlé’s ERP Implementation – Best Practices

Tailored Yet Focus on

Change Strong
Dedicated Standardize Long-Term
Pre- Phased Manageme Continuous Executive
Cross- d (Global Value and
Implementa Rollout nt & Testing & Sponsorshi
Functional Template Continuous
tion Audit Strategy Employee Fine-Tuning p&
Team with Local Improveme
Training Governance
Flexibility) nt

https://www.researchgate.net/publication/
350721376_THE_ERP_APPLICATION_ON_NESTLE
 Information Technology in SCM
isks and Causes of Failures of ERP Implementations

Inadequate Change
Management
Poor Data Migration

Over-Customization

Underestimating Costs & Time

Lack of Executive Support

Low System Adoption

 Information Technology in SCM
RP implementation Failure at Hershey Foods Corporation

Hershey’s ERP Disaster (1999, USA)

•What happened: Hershey attempted a
simultaneous implementation of SAP R/3, Siebel CRM,
and Manugistics SCM in a tight deadline.

https://kopisusa.com/wp-content/uploads/
ERP_Implementation_Failure_Hershey_Foods.pdf
 Information Technology in SCM
RP implementation Failure at Hershey Foods Corporation

Big Bang Implementation Approach: All modules (SAP, Siebel, Manugistics) went live
simultaneously
Poor Project Scheduling: Go-live delayed to July 1999, overlapping peak
Halloween/Christmas season

Y2K deadline: Implementation rushed to beat

Inadequate Testing and Data Issues: Key modules (order processing, billing) went live
without full testing
Lack of Change Management and Training: Employees had to learn 3 new systems
under pressure,

No CIO role during project start

Vendor Coordination Challenges: Multiple vendors (SAP, Siebel, Manugistics, IBM) led to
integration issues
 Information Technology in SCM
E-Businesses and ERP Systems

ERP systems Synchronizing Automating

Providing real-
serve as the online orders order-to-cash
time visibility
backbone for e- with inventory and procure-to-
into operations
business by: and finance pay cycles
 Information Technology in SCM
E-Businesses and ERP Systems

Unilever
•E-Business: B2B portals for distributors & e-
commerce channels
•ERP System: SAP S/4HANA
•Integration Example: Orders from e-commerce
platforms (Amazon, Daraz) are directly integrated
with SAP SD and MM modules for processing and
invoicing.
P&G
•E-Business: Uses AI-powered e-commerce analytics
and digital twin planning
•ERP System: SAP S/4HANA
•Integration Example: P&G integrates customer buying
data from e-commerce into ERP for demand forecasting
and production planning.
Video Link: https://www.youtube.com/watch?
v=L5uqLu2tW3M